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Summary
- The stock market in Canada had another good month in December, gaining 4.1%, which put the index up by 9.5% for the 4th quarter and 17.6% for the year.
- The Canadian bond market struggled again in December as mid-term bond yields continued to rise. The index gained 0.16% on the month but fell by 0.71% for the 4th quarter and generated a total return of 6.74% for the full year.
- Commodity markets continued their strength into year-end with oil prices rising 8.6% in December to over US$91 per barrel. Copper and zinc each gained over 15%, lumber was up by almost 20% and the CRB Commodity Index gained 10.4%.
- The Economic data remained positive and appears to be gaining more upside momentum, particularly in the US where employment had started to move higher and retail spending had a very strong finish to the year.
- In terms of stock sectors, the resource sectors once again lead the pack with the Energy sector the top mover, gaining 8.6% in December. The Telecom sector was the only decliner last month as investors increased risk by selling defensive groups.
- Our Stock Market Outlook is still bullish over the medium-term as economic growth is recovering, profits continue to improve, interest rates remain low and stock valuations are reasonable. Stocks have had strong gains since the market lows last August and are always at risk of a short-term correction, particularly since investor sentiment levels have gotten somewhat bullish lately, as often seen at short-term market highs. But we view that only as a short-term risk. The overall fundamental outlook argues for higher stock prices over the next few years. Corporate profits are within 10% of their prior peak and there’s no reason to think that stock prices won’t do the same.